Research Solutions Reports Fiscal Fourth Quarter and Full Year 2017 Financial Results

ENCINO, Calif., Sept. 18, 2017 /PRNewswire/ -- Research Solutions, Inc. (OTCQB: RSSS), a pioneer in providing cloud-based solutions for scientific research, reported financial results for its fiscal fourth quarter and full year ended June 30, 2017.

The preliminary results below are from continuing operations and exclude the results of the Reprints and ePrints business whose assets were sold on June 30, 2017. In addition, prior period results for the Reprints and ePrints business are classified as discontinued operations.

Fiscal Fourth Quarter 2017 Summary vs. Year-Ago Quarter

    --  Total revenue increased 11% to $6.8 million.
    --  Platform revenue up 145% to $318,000, with a 137% increase in total
        Platform deployments to 140. Annual recurring revenue was up 137% to
        $1.4 million.
    --  Transaction revenue up 8% to $6.5 million, with customer count up 11% to
        1,001. Transaction count up 11% to 212,386.
    --  Total gross margin up 180 basis points to 25.0%.
    --  Net loss from continuing operations was $0.8 million, or $(0.03) per
        share, compared to a net loss of $0.2 million, or $(0.01) per share.

Management Commentary
"As our preliminary results indicated, the market momentum for our SaaS Platform business continues to grow," said Peter Derycz, president and CEO of Research Solutions. "Fourth quarter deployments more than doubled to 140, with annual recurring revenue up 137% to $1.4 million. In our Transactions business, the proactive measures we put into place last quarter to grow revenue and improve margins are having their intended effect. We look forward to our operational and financial momentum continuing into fiscal 2018."

Fiscal Fourth Quarter 2017 Financial Results
Total revenue increased 11% to $6.8 million compared to $6.2 million in the same year-ago quarter.

Platform subscription revenue increased 145% to $318,000 compared to $130,000 in the year-ago quarter. The increase was due to a 137% increase in the total number of paid Platform deployments to 140. The quarter ended with annual recurring revenue up 137% to $1.4 million (see the company's definition of annual recurring revenue below).

Transaction revenue increased 8% to $6.5 million compared to $6.0 million in the same year-ago quarter. Total active customers increased 11% from 909 to 1,011, and transaction count also increased 11% from 191,000 to 212,000 (see the company's definition of active customer accounts and transactions below).

Total gross margin increased 180 basis points to 25.0% from 23.2% in the same year-ago quarter. The increase was driven by a revenue mix shift to the higher-margin Platforms business.

Total operating expenses increased to $2.5 million compared to $1.6 million in the year-ago quarter, driven primarily by the company's investment in sales, marketing and technology personnel to support increased Platform sales and deployments.

Net loss from continuing operations in the fiscal fourth quarter was $0.8 million, or $(0.03) per share, compared to a net loss of $0.2 million, or $(0.01) per share, in the year-ago quarter. Adjusted EBITDA totaled $(0.6) million compared to $0.0 million in the year-ago quarter (see definition and further discussion about the presentation of Adjusted EBITDA, a non-GAAP term, below). Both the net loss and Adjusted EBITDA reflect the company's investment in its Platform business.

Cash and cash equivalents at June 30, 2017 were $5.8 million compared to $6.1 million at June 30, 2016. There were no outstanding borrowings under the company's revolving line of credit, which provides the lesser of $4 million or 80% of eligible accounts receivable. Apart from a $0.3 million office lease liability due to new accounting guidance for leases, the company had no long-term liabilities or other debt.

Full Year 2017 Financial Results
Total revenue increased 7% to $25.7 million compared to $24.1 million in 2016.

Platform subscription revenue increased 144% to $980,000 compared to $402,000 in 2016. The increase was due to the previously mentioned increase in total paid Platform deployments to 140 and strong annual recurring revenue growth to $1.4 million.

Transaction revenue increased 4% to $24.8 million compared to $23.7 million in 2016. Total active customers increased 11% from 873 to 967, and transaction count increased 9% from 741,849 to 810,083.

Total gross margin increased 30 basis points to 23.7% from 23.4% in 2016. The increase was driven by the revenue mix shift to the higher-margin Platforms business.

Total operating expenses increased to $9.2 million compared to $6.9 million in 2016, driven primarily by the company's investment throughout the year in sales, marketing and technology personnel to support increased Platform sales and deployments.

Net loss from continuing operations in fiscal 2017 was $3.1 million, or $(0.14) per share, compared to a net loss of $1.4 million, or $(0.08) per share, in 2016. Adjusted EBITDA totaled $(2.3) million compared to $(0.5) million in 2016. Both the net loss and Adjusted EBITDA reflect the company's investment in its Platform business.

Further details about these results are available in the company's annual report on Form 10-K, which is available in the investor relations section of the company's website at www.researchsolutions.com.

Conference Call
Research Solutions President and CEO Peter Derycz and CFO Alan Urban will host an investor conference call to discuss these results and the company's outlook, followed by a question and answer period.

Date: Monday, September 18, 2017
Time: 5:00 p.m. Eastern time (2:00 p.m. Pacific time)
Toll-free dial-in number: 1-855-327-6837
International dial-in number: 1-631-891-4304
Conference ID: 10003523

Please call the conference telephone number 5-10 minutes prior to the start time. An operator will register your name and organization. If you have any difficulty connecting with the conference call, please contact Liolios Group at 1-949-574-3860.

The conference call will be broadcast live and available for replay here and via the investor relations section of the company's website at www.researchsolutions.com.

A replay of the conference call will be available after 8:00 p.m. Eastern time on the same day through October 2, 2017.

Toll-free replay number: 1-844-512-2921
International replay number: 1-412-317-6671
Replay ID: 10003523


    Fiscal Fourth Quarter and Full Year 2017 Financial and Operational Summary Tables


                                                                                        Quarter Ended June 30,

                                                                                                                  2017            2016    Change                       %
                                                                                                                  ----            ----    ------                      ---

    Revenue:

                  Platforms                                                                                  $318,194        $129,963                  $188,231       144.8%

                  Transactions                                                                              6,521,313       6,025,972                   495,341         8.2%
                                                                                                          ---------       ---------                   -------         ----

    Total Revenue                                                                                         6,839,507       6,155,935                   683,572        11.1%


    Gross Profit:

                  Platforms                                                                                   247,097         106,537                   140,560       131.9%

                  Transactions                                                                              1,460,813       1,323,080                   137,733        10.4%
                                                                                                          ---------       ---------                   -------        -----

    Total Gross Profit                                                                                    1,707,910       1,429,617                   278,293        19.5%


    Gross profit as a % of revenue:

                  Platforms                                                                                     77.7%          82.0%                    -4.3%

                  Transactions                                                                                  22.4%          22.0%                     0.4%

    Total Gross Profit                                                                                        25.0%          23.2%                     1.7%


    Operating Expenses:

                  Sales and marketing                                                                         988,962         520,402                   468,560        90.0%

                  General and administrative                                                                1,326,798         902,667                   424,131        47.0%

                  Depreciation and amortization                                                                36,893          29,702                     7,191        24.2%

                  Stock-based compensation                                                                    112,151         162,192                  (50,041)      -30.9%

                  Foreign currency translation loss                                                           (6,362)            994                   (7,356)     -740.0%
                                                                                                                                                                 ------

    Total Operating Expenses                                                                              2,458,442       1,615,957                   842,485        52.1%
                                                                                                          ---------       ---------                   -------         ----

    Income (loss) from operations                                                                         (750,532)      (186,340)                (564,192)     -302.8%


    Other Income (Expenses):

                  Interest expense                                                                            (3,000)        (3,000)                        -        0.0%

                  Other income (expense)                                                                        3,584        (13,382)                   16,966       126.8%

                  Provision for income taxes                                                                  (7,009)        (5,652)                  (1,357)      -24.0%

                  Income from discontinued operations                                                         113,314         155,385                  (42,071)      -27.1%

                  Gain on sale of discontinued operations                                                     241,196               -                  241,196

    Total Other Income (Expenses):                                                                          348,085         133,351                   214,734       161.0%
                                                                                                            -------         -------                   -------        -----


    Net income (loss)                                                                                    $(402,447)      $(52,989)               $(349,458)     -659.5%


    Transactions:

                  Transaction count                                                                           212,386         191,376                    21,010        11.0%

                  Corporate customers                                                                             810             756                        54         7.1%

                  Academic customers                                                                              201             153                        48        31.4%

                  Total customers                                                                               1,011             909                       102        11.2%



                                                                                      Year Ended June 30,

                                                                                                               2017            2016    Change                       %
                                                                                                               ----            ----    ------                      ---

    Revenue:

                  Platforms                                                                                  $980,323        $402,038                  $578,285       143.8%

                  Transactions                                                                             24,766,953      23,690,073                 1,076,880         4.5%
                                                                                                         ----------      ----------                 ---------         ----

    Total Revenue                                                                                        25,747,276      24,092,111                 1,655,165         6.9%


    Gross Profit:

                  Platforms                                                                                   775,272         328,116                   447,156       136.3%

                  Transactions                                                                              5,328,922       5,306,527                    22,395         0.4%
                                                                                                          ---------       ---------                    ------         ----

    Total Gross Profit                                                                                    6,104,194       5,634,643                   469,551         8.3%


    Gross profit as a % of revenue:

                  Platforms                                                                                     79.1%          81.6%                    -2.5%

                  Transactions                                                                                  21.5%          22.4%                    -0.9%

    Total Gross Profit                                                                                        23.7%          23.4%                     0.3%


    Operating Expenses:

                  Sales and marketing                                                                       3,388,248       2,041,559                 1,346,689        66.0%

                  General and administrative                                                                5,015,794       4,069,786                   946,008        23.2%

                  Depreciation and amortization                                                               133,694          90,846                    42,848        47.2%

                  Stock-based compensation                                                                    630,163         713,890                  (83,727)      -11.7%

                  Foreign currency translation loss                                                            20,865           5,287                    15,578       294.6%
                                                                                                                                                                 ------

    Total Operating Expenses                                                                              9,188,764       6,921,368                 2,267,396        32.8%
                                                                                                          ---------       ---------                 ---------         ----


    Income (loss) from operations                                                                       (3,084,570)    (1,286,725)              (1,797,845)     -139.7%


    Other Income (Expenses):

                  Interest expense                                                                           (12,000)       (17,382)                    5,382        31.0%

                  Other income (expense)                                                                       23,861        (31,611)                   55,472       175.5%

                  Provision for income taxes                                                                 (35,495)       (28,162)                  (7,333)      -26.0%

                  Income from discontinued operations                                                         573,445         866,022                 (292,577)      -33.8%

                  Gain on sale of discontinued operations                                                     241,196               -                  241,196

    Total Other Income (Expenses):                                                                          791,007         788,867                     2,140         0.3%
                                                                                                            -------         -------                     -----          ---


    Net income (loss)                                                                                  $(2,293,563)     $(497,858)             $(1,795,705)     -360.7%


    Platforms:

                  ARR (Annual recurring revenue)                                                           $1,376,729        $580,902                  $795,827       137.0%

                  Deployments                                                                                     140              59                        81       137.3%

                  ASP (Average sales price)                                                                    $9,834          $9,846                     $(12)       -0.1%

    Transactions:

                  Transaction count                                                                           810,083         741,849                    68,234         9.2%

                  Corporate customers                                                                             782             733                        50         6.8%

                  Academic customers                                                                              185             140                        45        31.7%

                  Total customers                                                                                 967             873                        94        10.8%

Active Customer Accounts, Transactions and Annual Recurring Revenue
The company defines active customer accounts as the sum of the total quantity of customers per month for each month in the period divided by the respective number of months in the period. The quantity of customers per month is defined as customers with at least one transaction during the month.

A transaction is an order for a unit of copyrighted content fulfilled or managed in the Platform.

The company defines annual recurring revenue as the value of contracted Platform subscription recurring revenue normalized to a one-year period.

Use of Non-GAAP Measure - Adjusted EBITDA
Research Solutions' management evaluates and makes operating decisions using various financial metrics. In addition to the company's GAAP results, management also considers the non-GAAP measure of Adjusted EBITDA. Management believes that this non-GAAP measure provides useful information about the company's operating results.

The tables below provide a reconciliation of this non-GAAP financial measure with the most directly comparable GAAP financial measure. Adjusted EBITDA is defined as net income (loss), plus interest expense, other income (expense), foreign currency transaction loss, provision for income taxes, depreciation and amortization, stock-based compensation, income from discontinued operations, gain on sale of discontinued operations, and other potential adjustments that may arise.

Set forth below is a reconciliation of Adjusted EBITDA to net income (loss):


                                                                             Quarter Ended June 30,

                                                                                   2017              2016 Change
                                                                                   ----              ---- ------

    Net Income (loss)                                           $(402,447)    $(52,989)       $(349,458)

                      Add (deduct):

                      Interest expense                                            3,000             3,000                     -

                      Other income (expense)                                    (3,584)           13,382              (16,966)

                      Foreign currency translation loss                         (6,362)              994               (7,356)

                      Provision for income taxes                                  7,009             5,652                 1,357

                      Depreciation and amortization                              36,893            29,702                 7,191

                      Stock-based compensation                                  112,151           162,192              (50,041)

                      Income from discontinued operations                     (113,314)        (155,385)               42,071

                      Gain on sale of discontinued operations                 (241,196)                -            (241,196)
                                                                               --------               ---             --------

                      Adjusted EBITDA                                        $(607,850)           $6,548            $(614,398)



                                                                            Year Ended June 30,

                                                                                   2017              2016 Change
                                                                                   ----              ---- ------

    Net Income (loss)                                         $(2,293,563)   $(497,858)     $(1,795,705)

                      Add (deduct):                                                   -                -

                      Interest expense                                           12,000            17,382               (5,382)

                      Other income (expense)                                   (23,861)           31,611              (55,472)

                      Foreign currency translation loss                          20,865             5,287                15,578

                      Provision for income taxes                                 35,495            28,162                 7,333

                      Depreciation and amortization                             133,694            90,846                42,848

                      Stock-based compensation                                  630,163           713,890              (83,727)

                      Income from discontinued operations                     (573,445)        (866,022)              292,577

                      Gain on sale of discontinued operations                 (241,196)                -            (241,196)
                                                                               --------               ---             --------

                      Adjusted EBITDA                                      $(2,299,848)       $(476,702)         $(1,823,146)

About Research Solutions
Research Solutions, Inc. (OTCQB: RSSS) is a pioneer in cloud-based research intelligence and retrieval solutions for R&D-driven organizations. More than 70 percent of the top 25 pharmaceutical companies in the world rely on services delivered by Research Solutions' wholly owned subsidiary Reprints Desk. The company's Software-as-a-Service (SaaS) Platform provides customers with on-demand access to, and augmented data from, tens of millions of scientific, medical, and technical (STM) documents, helping them to accelerate acquisition at the point of discovery, save time and money, and remain copyright-compliant. For more information, visit www.researchsolutions.com.

Important Cautions Regarding Forward-Looking Statements
Certain matters discussed in this press release may be forward-looking statements. Such matters involve risks and uncertainties that may cause actual results to differ materially, including the following: changes in economic conditions; general competitive factors; acceptance of the company's products in the market; the company's success in obtaining new customers and new Platform deployments; the company's success in technology and product development; the company's ability to execute its business model and strategic plans; the company's success in integrating acquired entities and assets, and all the risks and related information described from time to time in the company's filings with the Securities and Exchange Commission ("SEC"), including the financial statements and related information contained in the company's Securities and Exchange Commission Annual Report on Form 10-K and interim Quarterly Reports on Form 10-Q. The company assumes no obligation to update the cautionary information in this release.


                                             Research Solutions, Inc. and Subsidiaries

                                                    Consolidated Balance Sheets


                                                                                June 30,               June 30,

                                                                                     2017                   2016
                                                                                     ----                   ----

                                     Assets

    Current assets:

    Cash and cash equivalents                                                               $5,773,950              $6,076,875

    Accounts receivable, net of allowance of $119,536 and
     $52,084, respectively                                                                   5,465,299               5,761,860

    Prepaid expenses and other current assets                                                  196,820                 164,610

    Prepaid royalties                                                                          566,282                 173,665

    Total current assets                                                                    12,002,351              12,177,010


    Other assets:

    Property and equipment, net of accumulated depreciation
     of $699,421 and $642,051, respectively                                                     85,737                  82,207

    Intangible assets, net of accumulated amortization of
     $623,714 and $546,679, respectively                                                        41,870                 104,848

    Deposits and other assets                                                                   14,466                   7,594

    Right of use asset, net of accumulated amortization of
     $45,105                                                                                   417,917                       -
                                                                                               -------                     ---

    Total assets                                                                           $12,562,341             $12,371,659
                                                                                           ===========             ===========


                      Liabilities and Stockholders' Equity

    Current liabilities:

    Accounts payable and accrued expenses                                                   $6,443,056              $5,690,768

    Deferred revenue                                                                         1,335,475                 639,834

    Lease liability, current portion                                                           110,888                       -

    Total current liabilities                                                                7,889,419               6,330,602


    Long-term liabilities:

    Lease liability, long-term portion                                                         328,299                       -

    Total liabilities                                                                        8,217,718               6,330,602
                                                                                             ---------               ---------


    Commitments and contingencies


    Stockholders' equity:

    Preferred stock; $0.001 par value; 20,000,000 shares
     authorized; no shares issued and outstanding                                                    -                      -

    Common stock; $0.001 par value; 100,000,000 shares
     authorized; 23,883,145 and 23,809,593 shares issued and
     outstanding, respectively                                                                  23,883                  23,810

    Additional paid-in capital                                                              22,267,327              21,642,763

    Accumulated deficit                                                                   (17,875,858)           (15,582,295)

    Accumulated other comprehensive loss                                                      (70,729)               (43,221)
                                                                                               -------                 -------

    Total stockholders' equity                                                               4,344,623               6,041,057
                                                                                             ---------               ---------

    Total liabilities and stockholders' equity                                             $12,562,341             $12,371,659
                                                                                           ===========             ===========


                                                       Research Solutions, Inc. and Subsidiaries

                                           Consolidated Statements of Operations and Other Comprehensive Loss


                                                             Years Ended

                                                               June 30,
                                                               --------

                                                                    2017                                      2016
                                                                    ----                                      ----


    Revenue:

    Platforms                                                                                     $980,323             $402,038

    Transactions                                                                                24,766,953           23,690,073
                                                                                                ----------           ----------

    Total revenue                                                                               25,747,276           24,092,111
                                                                                                ----------           ----------


    Cost of revenue:

     Platforms                                                                                     205,051               73,922

    Transactions                                                                                19,438,031           18,383,546
                                                                                                ----------           ----------

    Total cost of revenue                                                                       19,643,082           18,457,468
                                                                                                ----------           ----------

    Gross profit                                                                                 6,104,194            5,634,643
                                                                                                 ---------            ---------


    Operating expenses:

    Selling, general and administrative                                                          9,055,070            6,830,522

    Depreciation and amortization                                                                  133,694               90,846

    Total operating expenses                                                                     9,188,764            6,921,368
                                                                                                 ---------            ---------

    Loss from operations                                                                       (3,084,570)         (1,286,725)
                                                                                                ----------           ----------


    Other income (expenses):

    Interest expense                                                                              (12,000)            (17,382)

    Other income (expense)                                                                          23,861             (31,611)

    Total other income (expenses)                                                                   11,861             (48,993)


    Loss from continuing operations before
     provision for income taxes                                                                (3,072,709)         (1,335,718)

    Provision for income taxes                                                                    (35,495)            (28,162)
                                                                                                   -------              -------


    Loss from continuing operations                                                            (3,108,204)         (1,363,880)
                                                                                                ----------           ----------


    Discontinued operations:

    Income from discontinued operations                                                            573,445              866,022

    Gain from sale of discontinued
     operations                                                                                    241,196                    -
                                                                                                   -------                  ---

    Income from discontinued operations                                                            814,641              866,022
                                                                                                   -------              -------


    Net loss                                                                                   (2,293,563)           (497,858)


    Other comprehensive loss:                                                                     (27,508)            (13,874)

    Foreign currency translation


    Comprehensive loss                                                                        $(2,321,071)          $(511,732)
                                                                                               ===========            =========


    Income (loss) per common share:

    Loss per share from continuing
     operations, basic and diluted                                                                 $(0.14)             $(0.08)

    Income per share from discontinued
     operations, basic and diluted                                                                   $0.04                $0.05

    Net loss per share, basic and diluted                                                          $(0.10)             $(0.03)

    Weighted average common shares
     outstanding, basic and diluted                                                             23,241,572           17,769,827

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